Thursday, 29 September 2011

Germany backs revamped euro bailout fund

Angela Merkel has successfully corralled her government into voting for the revamped euro bailout fund, asserting her authority as chancellor by pushing through the bill without needing to rely on opposition help.
Of 611 MPs present in a highly-charged sitting at the Bundestag on Thursday morning, 523 voted in favour of expanding the powers of the European Financial Stability Facility (EFSF).
Under the plan, the EFSF will be enlarged to €440bn (£382bn). It will also be given the ability to give "precautionary loans" to struggling European countries, buy EU government debt, and provide funding to shore up the capital reserves of European banks.
The result was a triumph for Germany's shaky coalition government and marked a major step towards tackling the eurozone's sprawling sovereign debt crisis. Some analysts, though, argue that more radical measures will be needed.
Eighty-five voted against the motion, including 10 from Merkel's own Christian Democratic bloc and three from the Free Democratic party (FDP), the chancellor's coalition partners. Most of the "no" voters belonged to the far-left Linke party, who believe the bailout fund will make banks richer and ordinary Europeans poorer.
Only three MPs abstained, meaning that Germany in the future will be guaranteeing loans to the EFSF of up to €211bn, rather than €123bn so far. Just a month ago, test votes suggested up to 25 coalition MPs were planning to rebel after polls showed three-quarters of Germans opposed the bill.
Had Merkel failed to pass the vote without relying on support from opposition MPs from the Social Democratic (SPD) and Green parties, many analysts believed her position would have been untenable and the coalition would have collapsed.
Yet after a night of intense lobbying, a majority of coalition members – 315 – voted in favour of the measure, enough to have ensured its passage even without opposition help.
"This shows the clear determination of the coalition on this issue," Rainer Brüderle, parliamentary leader of Merkel's junior partner, the Free Democrats, told the n-tv broadcaster after the vote. "We have made an important decision for Europe."
Yet Frank Schäffler, also of the Free Democrats, argued that bailout measures had worsened Greece's economic situation.
"Despite all arguments, the first bailout did not make the situation for Greece better, but worse," Schäffler said. "Expanding the fund will make the situation even worse."
Though Merkel described the euro before the vote as "our common future" and said approving the beefed-up bailout fund was "of the very, very greatest significance", discussions went deep into the night Wednesday, in an attempt to win over dissenting members of her governing coalition.
On Wednesday, Finland voted in favour of expanding the fund's powers despite earlier threats to pull out of a rescue plan for Greece. The fund expansion has to be ratified by all 17 eurozone nations to take force.
Germany's upper house of parliament is expected to pass the measure on Friday.

by Helen Pidd taken from http://www.guardian.co.uk/business/2011/sep/29/germany-backs-euro-bailout-fund